Axis Bank, India's third-largest private sector lender, has increased interest rates on select retail term deposits by 30 basis points (bps), according to people familiar with the development.
The rate revision is effective from today.
The private lender will now pay 9.30 per cent interest on deposits maturing in 18 months to less than two years, two years to less than 30 months, 30 months to less than three years and three years to less than five years.
The bank was earlier offering nine per cent interest on these deposits.
The move comes at a time when industry has been asking banks to lower their lending rates to revive investments. Bankers have been saying deposit rates need to fall before they can reduce lending rates. Top executives of Axis Bank, however, believe this rate increase in select deposits will not limit the bank's ability to pare its base rate (minimum lending rate).
"This is part of our asset-liability management. I don't think it will have any impact on base rate. Generally, we are encouraging retail depositors to keep their money with us. Hence, we decided to increase rates in certain long-term deposits. We intend to keep these rates only for a few days," a senior executive of the bank said, on condition of anonymity.
Axis Bank's base rate is currently at 10 per cent and is higher than other large private and public sector banks. A week ago, HDFC Bank reduced its base rate by 10 bps to 9.6 per cent. ICICI Bank's base rate is currently at 9.75 per cent, while the State Bank of India's minimum lending rate is 9.7 per cent.
On the other hand, a few state-run lenders have already announced a cut in deposit rates. Punjab National Bank, for instance, has reduced its deposit rates by up to 200 bps.
Meanwhile, Axis Bank said today it would appoint Rajiv Anand as president of retail banking with effect from May 1. Anand is currently managing director and CEO of Axis Asset Management Company. He will report to R K Bammi, executive director of Axis Bank's retail banking business.